California Avenue project's costs grow

City Council bullish on streetscape project, sees long-term benefits

Recent history has demonstrated that both deadlines and cost estimates for large construction projects can be frustratingly fungible in Palo Alto. The city's Mitchell Park Library and Community Center, when completed, will be more than two years behind schedule and millions of dollars over the budget Palo Alto officials had in mind when they awarded the bid in 2010.

But optimism reigns when it comes to California Avenue's streetscape project. Despite a climate of skepticism in the business community and a price tag that has risen dramatically, the City Council has been unanimous and enthusiastic about the changes at every step of the approval process. Even the winning bid -- which pegs the cost of replacing the old fountain near the Caltrain station at $647,000 (compared to the city's estimate of $70,000) and the cost of planting and irrigation at $114,140 (versus the city's estimate of $43,992) -- was accepted by the council without dissent last month, despite some apprehension about staff's request for covering unforeseen expenses.

While city officials have been marching in lockstep on this item, opinions around California Avenue have been far more mixed. As the council considered approving the project in late 2010 and early 2011, merchants mobilized against reducing the driving lanes from four to two, with owners from local businesses such as European Cobblery, Keeble & Shuchat and La Bodeguita warning about the traffic nightmares it would cause.

A representative from Mollie Stone's supermarket argued at a City Council meeting in February 2011 that if the lane reduction ends up limiting people's access to the stores and reducing sales, "The community would lose a beloved local business."

Former Vice Mayor Jack Morton made a similar point about area restaurants, warning the council just before the vote that the lane reduction "may undermine the viability and vitality of the restaurant area."

"If we're wrong about the way traffic flows, we will destroy a business district," said Morton, who is now the president of the California Avenue Business Association.

But the council views the streetscape project as a once-in-a-lifetime chance to bring fortune to the door of California Avenue. Though improvements had been discussed for years, it was a $1.2 million grant from the Santa Clara Valley Transportation Authority in the fall of 2010 that put the project's pedal to the metal. At the time, the city had expected to kick in another $550,000 in local funds for a streetscape revamp that was then limited to the lane reduction, improved signage, new benches and newsracks, and better crosswalks.

Since then, the project has more than quadrupled in price as its scope has snowballed and the regional construction climate has heated up, driving up bids.

In February 2011, as the council took its first unanimous vote to support the project, Councilwoman Karen Holman and Councilman Greg Schmid proposed exploring wider sidewalks with the goal of creating a "sense of place" on California Avenue.

"If we're going to do this, we should do it optimally," Holman said at the Feb. 14, 2011, meeting. "It might be worth some additional investment."

Councilman Pat Burt said the streetscape project will be "one of the best things that has happened in this town for a long time." Councilman Greg Scharff concurred and pointed out that the California Avenue improvement is "for the long term."

"We should be very careful about being penny-wise and pound-foolish and not getting the optimal results for California Avenue while we're doing it," Scharff said. "I think that would be a huge mistake."

The city has been aggressively avoiding penny-wisdom ever since. The additional investment in sidewalks jumped from an estimated $700,000 earlier in the process to roughly $1.15 million after staff determined that redoing the drainage and making further sidewalk enhancements between Ash and Birch streets would be more complex (and hence expensive) than expected. No one on the council thought this was a particularly big deal. And no one blinked in March 2013, when members unanimously agreed to spend another $1.2 million to replace all the streetlights on California Avenue, raising the budget to more than $4 million. At every juncture, the feeling was that if the city was going to swing, it might as well swing for the fences.

"I think there are few times that you can spend money more wisely than this time," Councilwoman Liz Kniss said during the streetlights discussion.

Others concurred. This is, after all, a rare chance to transform the charming but age-old business strip into something more like glamorous and happening -- something like University Avenue, the city's prominent downtown artery, or Mountain View's popular and recently revitalized Castro Street.

"This has become a big commitment to a district," Burt said shortly before the streetlight vote. "It's a nice 50-year kind of a project, and it's going to be an important decision."

Councilman Larry Klein was more cautious than his colleagues. After questioning staff about the rising costs of sidewalk widening, Klein asked if there are "any other areas where you think we may have underestimated?" City Manager James Keene said, "There's nothing in the near-term I can see we'd be coming back for," but acknowledged that it's possible costs could rise during construction. Keene also told the council that the grand plan for California Avenue didn't exactly start out as a grand plan but morphed out of a grant application, which helps explain the constant budget adjustments.

"We've been opportunistic on this whole project," Keene said. "We didn't sit down with a grand design. We knew we had a problem; we had VTA grant funding eligible; and we went and pursued it. The council rightfully saw (that) when we got that, it's a great start, but boy if we had more, we can accomplish a whole lot more."

Then came the water main. Last summer, the Utilities Department determined that time is ripe to replace the corroded water line under California Avenue, which was installed 74 years ago and has had recurring leaks, according to a recent staff report. Not wishing to tear up the freshly repaved streets, the Utilities Department raced to get the main replaced before the construction was set to begin. When it didn't get the bids it was seeking, the replacement of the water main became another component of the California Avenue streetscape project. Initially, the cost of the main replacement was estimated at $400,000. It was later revised to $1.2 million.

Caution turned to concern -- momentarily -- on Feb. 24, when staff presented to the council for approval a $7.1 million contract with the company Redgwick Construction, a sum that included $900,000 for unexpected contingencies (15 percent of the construction sum). Even after all the adjustments -- the wider sidewalks, the new water main, and a fountain sculpture to replace the once charming and long-neglected "birdbath" fountain -- the $6.2-million construction bid (minus the contingency) was $1.2 million more than city engineers had expected to spend when they requested the proposals.

After a brief discussion, council members agreed to reduce the contingency amount to $620,000. Kniss cited the example of Mitchell Park in stressing the need to keep a close eye on the California Avenue budget. Klein pointed to the wide disparity in numerous construction categories between engineer estimates and Redgwick's bid (in the "general" category, the figures were $190,000 and $952,000, respectively; for replacing an aged water main, the figures were $400,000 and $1.2 million). The explanation from Chief Transportation Official Jaime Rodriguez -- that Redgwick is still waiting for estimates from its subcontractors and just "dumped" these numbers into its bid -- did little to reassure Klein about the budget differential.

"Are we OK with the idea that they might end up making a pretty good profit in that category?" Klein asked.

Minutes later, the council answered the question in the affirmative as it voted to approve the contract with no dissent.

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